Largest Venezuelan Food Producer Denies Hoarding

Venezuela's largest food producer, Polar Foods, denied that it is withholding food from the market in response to declarations by President Hugo Chávez in his Sunday talk show Aló Presidente that Polar is a "clear example" of a company that will be "immediately intervened in...and taken under control of the government" if it is caught hoarding food.

Caracas, February 20, 2008, (venezuelanalysis.com) - Venezuela's largest food producer, Polar Foods, denied that it is withholding food from the market and assured that "all of Polar's plants are producing at maximum capacity" in a statement released Monday by the company's Executive Vice President, Ramón Carrizales.

The statement came in response to declarations by President Hugo Chávez in his Sunday talk show Aló Presidente that Polar is a "clear example" of a company that will be "immediately intervened in...and taken under control of the government" if it is caught hoarding food.

Polar has been subject to more than 70 inspections in the last four months by several government entities including the National Consumer Defense Institute (INDECU), which Carrizales said proves that the company is operating normally. In addition, Polar does not produce many of the foods in scarcity, such as milk, chicken, meats, sugar, coffee, and eggs, Carrizales emphasized.

Also, Polar does not supply food to Mercal, the government's subsidized food market which has suffered severe food shortages recently, although Polar has offered to sell corn flour to Mercal and been rejected, Carrizales claimed.

Carrizales argued Polar is removed from the recent wave of price speculation, because the company does not sell directly to consumers, but rather to a network of over 50,000 independent distributors, at wholesale prices "marked on the package of each product."

Price speculation this month has been pervasive among essential foods such as pasta, rice, and potatoes, meats, oil, sugar, some vegetables, and personal sanitary products, according to reports released this week by brigades made up of local community councils, Municipal Consumer Education and Defense Offices (OMDECU), and the Finance Ministry's customs service (SENIAT). INDECU fined and temporarily closed at least 3,200 businesses for price speculation in January.

The same day as Carrizales`s announcements, the president of the Venezuelan Federation of Chambers of Commerce and Production (FEDECAMARAS), José Manuel González, suggested that Chávez`s accusations against Polar and government interventions in the private sector discourage "necessary investments" that "produce decent employment and feed the country," and that the government is "toying with chaos [and] food scarcity". He added that in the past, "when there were not so many controls... and the private sector could work in peace in this country, absolutely everything could be found."

On the other hand, the president of the National Federation of Micro, Small, and Medium Industries of Venezuela (Fedeindustria), Miguel Pérez Abad, told newspapers Monday that small and medium-sized businesses have greatly increased their sales and income as a result of the government`s nationalization of oil reserves in the Orinoco River Belt and the socialization of oil profits, which boosted the buying power of the poorest sectors of the population. Fedeindustria "completely supports the new oil politics of the Bolivarian government," Pérez said, reiterating that during pre-Chávez "Petroleum Opening" era, smaller industries found it "impossible" to access national capital controlled by the state oil company PDVSA.

Pérez remarked that there was a 200% increase in the international price of milk over the last two years, prompting the government to raise the controlled price of milk to improve the supply of milk last month. The government also contracted with Argentina and other countries to import almost 20,000 tons of milk per month, generating a partial, short term return of milk to market stands this month.

But Roger Figueroa, the president of the Venezuelan Chamber of Lactose Industries (CAVILAC), said that 300,000 tons are needed in the short term, and a 35% increase in national milk importation quotas in the long term, in order to satisfy the demand, which has increased four-fold over the past four years.

In a similar situation, the government raised rice prices by a third last week, but the Venezuelan Chamber of Food Industries (CAVIDEA) reported that a worldwide rice scarcity has kept supplier countries such as Chile from making deliveries for over 200 days.

In order to facilitate imports, the Venezuelan government permitted fast-track import payments this year and increased the supply of dollars by 75% over the past three years. However, foreign purchases increased by 151% during that time, according to Central Bank figures and analysts such as Pérez say the government should supply more dollars or else make other types of government credits available soon.

Currently, 40% of the nation`s imports are contracted by the government, while 60% are private transactions, according to CAVIDEA. This may change, though, when Argentine President Cristina de Kirchner meets with President Chávez on March 6th to sign a commercial production alliance for the "food security and sovereignty of Venezuela".

Central Bank figures show a 728% increase in government financing towards agricultural production between 2004 and 2007, and the National Land Institute (INTI) reported having "rescued" 601 unused farms by allocating them to local farmers, many of them indigenous communities, in 2007. But still, the 12.2% increase in national production has paled in comparison to the 37.4% increase in overall demand.

According to Food Minister Félix Osorio, in many regions food deliveries are disproportionate to local demand, especially in the immensely over-supplied states along the border with Colombia. In response, the government met with private industries and registered 6000 businesses in a system of centrally managed "mobilization guides" to monitor food distribution and prevent smuggling. The armed forces have also been deployed to supervise the transport of certain foods, such as milk, and will handle all distribution for 541 new food markets called "little PDVALs", which are run through the state oil company PDVSA.

This intensive government management of the supply chain is an "incorrect application of the law on food hoarding" and obstructs food delivery, Carraziles claimed. He concluded by expressing Polar`s willingness to meet with the government "as many times as necessary" to solve supply problems, since the issue "demands joint action between government and private enterprise".

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